The setup
With this method, I'm using the currency indices for each major currency to trade the direction of the long-term movement.
Each major currency: USD, EURO, GBP, CHF, JPY, AUD, CAD, has a currency index which is that currencies strength compared to a group or basket of other currencies. DXY is the U.S. dollar index, EXY is the Eur index, BXY is the GBP index, SXY is the CHF index, JXY is the JPY index, CXY is the CAD index, and AXY is the AUD index. The indies are measured in several timeframes, from Monthly down to 1 minute. I use the Monthly, Weekly, Daily for the longer term momentum, with the direction from the longer term I use 4 Hour, 1 Hour, 15 min, timeframes to better time the entry.
The indies are charted by
Trading Veiw Indices Charts/
This is the monthly view, you can see the DXY is getting stronger while the other currencies are weakening.
So if we are trading based on a long term outlook you could go with the USD.
Now the weekly view:
Weekly view is also showing the DXY strengthing and the other weakening
And Daily indices chart DXY is strenthening against other currencies:
So long-term momentum is favoring the DXY the usd, but shorter-term entries can be better timed on the shorter timeframes unless you want to hold for days to weeks.
the 4-hour timeframe the longest short-term view
Now we see the DXY is turning flat
So we can now start to look for shorter-term turning points for the DXY against other currencies, let's look at the 1 hour
Now we can see that the 1 hour DXY is in fact weakening against other currencies and the other currencies are strethening.
At this point we can choose a FX pair to trade. I look for the weakest currency in the indices chart.
Going from monthly to 4-hour the AXY which is the AUD looks to be the weakest currency against the DXY the USD.
Now it depends on how close you want to monitor the trade, you could take a very long-term short of the AUD/USD or you can narrow in on turning points. I would look for moves in the AUD/USD up against the overall trend and when they make highs at resistance points, entering short with stops above those resistance points.
So if we are trading based on a long term outlook you could go with the USD.
Now the weekly view:
Weekly view is also showing the DXY strengthing and the other weakening
And Daily indices chart DXY is strenthening against other currencies:
So long-term momentum is favoring the DXY the usd, but shorter-term entries can be better timed on the shorter timeframes unless you want to hold for days to weeks.
the 4-hour timeframe the longest short-term view
Now we see the DXY is turning flat
So we can now start to look for shorter-term turning points for the DXY against other currencies, let's look at the 1 hour
Now we can see that the 1 hour DXY is in fact weakening against other currencies and the other currencies are strethening.
At this point we can choose a FX pair to trade. I look for the weakest currency in the indices chart.
Going from monthly to 4-hour the AXY which is the AUD looks to be the weakest currency against the DXY the USD.
Now it depends on how close you want to monitor the trade, you could take a very long-term short of the AUD/USD or you can narrow in on turning points. I would look for moves in the AUD/USD up against the overall trend and when they make highs at resistance points, entering short with stops above those resistance points.
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